A Trust Deed is the Scottish equivalent to an IVA (Individual Voluntary Arrangement). A trust deed is a willful understanding among the debtor and the creditors they owe cash to.
Debtors provide consent to pay a recurring payment towards their debt and toward the end of a fixed time, the remainder of your debt would be written off.
The debtor’s assets are transferred to someone who will take care of their monetary affairs. They are called trustees. The trustee will plan to pay the debtor’s creditors as much as the amount of the debt owed to them. This may include a portion or an entirety of their asset to compensate for the debt.
A trust deed can become ‘protected’ if most creditors are content with the conditions of the trust deed. This implies the trust deed is official on all creditors and they can’t find a way to recover the cash owed to them.
In the event that a trust deed isn’t ‘protected’, it won’t be official on the entirety of your creditors and they could still make a move to recover the cash a debtor owes them.
Is trust deed a good option for me? It could be an option if 1) the debt is more than £5,000, 2) you have assets that can be sold to pay off your debt, and 3) you have enough money to make recurring payments for your debt.
Advantages of a Trust Deed
- debts will be cleared out – a trust deed will for the most part reach a conclusion following 4 years. A large portion of the debt will be cleared out and debtors won’t need to settle them.
- acquiring cash – borrowing money is legal (acquiring credit) like a home loan or a credit card, despite of the fact that this might be hard to get practically speaking
- work and public office – debtors are not banned from particular kinds of business or public office as they would be under chapter 11 (called sequestration in Scotland)
- capacity to pay off bills – they don’t need to show that they’re unable to pay your bills as they pass due. This is sometimes called ‘apparent insolvency’. They must have demonstrate this so if a debtor would like to apply for insolvency (called sequestration in Scotland)
- barred from legal actions – in the event that debtors are considering setting up a trust deed, they can apply to the Accountant in Bankruptcy to stop their creditors finding a way to recover the cash the debtors owe them. This is known as a ‘ban’ and it goes on for about a month and a half. This will imply that your creditors can no longer make strides, for example, capturing your financial balance.
- no contact from creditors you owe cash to – the creditors, who a debtor owes, cash to can no longer get in touch with the debtor and rather would need to reach out to the debtor’s trustee
Disadvantages of a Trust Deed
- participation – in the event that the debtor doesn’t cooperate with trustee, they can apply to make the debtor bankrupt
- new cash or property – in the event that a debtor get any new cash or property within 4 years of the trust deed, these can be asserted by the trustee
- business – a debtor probably won’t have the option to continue maintaining their own business. The trustee may arrange for another person to maintain the business or they may sell the business
- you can’t be a company director – you can’t be the director of a limited company unless the terms of your trust deed allow it
- selling some possessions and property – the debtor may need to sell a portion of their assets
- credit rating – having a trust deed will influence a person’s credit rating for a long time from the date the trust deed starts. This can make it harder to get credit like a mortgage or a loan later on
- paying regular payments – you should pay towards your debts for at any rate 4 years
Will I lose my home? If a debtor owns their own home and they set up a trust deed, they may need to offer it so as to pay towards the debt.
In the event that the debtor has next to zero value in their home, they might have the option to set up a sort of protected trust deed which does exclude their home. (The equity in their home is the value of cash that you would have left subsequent to selling their home and taking care of the mortgage.) They can bar one home from their protected trust deed and it must be the main or the primary home that the debtor lives.
On the off chance that the trust deed includes their home, they have a family living with them and the trustee wants to sell the home, they can apply to the sheriff court to request the deal to be rejected or deferred for as long as 3 years.
The Cost of Trust Deeds. Insolvency Practitioners will charge you a fee for setting up the trust deed. They are not permitted to charge their expenses at an hourly rate. Rather they need to charge a single, fixed, upfront fee, in addition to a percentage of the assets that would be sold.
Insolvency practitioners’ charges can vary and can be costly. You should check the charges of various different insolvency practitioners before you choose which insolvency practitioner to utilize.
Trust deeds shouldn’t be seen as a handy solution for serious debt issues however they do at last lead to an individual taking care of just a part of the sums they owe and doing as such over an all-inclusive time frame. So on the off chance that you are focused on beating your debts without collateral and you are searching for legitimate security from banks as you expect to carry out so then entering a Trust Deed could be the correct decision for you.
With Getting out of Debt UK, we’ll help you determine if Trust Deeds are best for you, and you’d still avoid economic challenges. Contact us today to arrange a free consultation.